Labour market and Social Policy Review of Estonia Launch of the review, 11 May 2010 John Martin & Veerle Slootmaekers Directorate for Employment, Labour and Social Affairs, OECD www.oecd.org/els/estonia2010 Source: OECD How does Estonia compare with the OECD in terms of unemployment during the crisis? Harmonised unemployment rate Dec 2007 Dec 2009 %-point change since Dec 2007 Norway 2.4 3.3 0.9 Japan 3.8 5.2 1.2 Australia 4.3 5.5 1.0 Czech Republic 4.9 7.4 3.0 Germany 7.9 7.4-0.6 United Kingdom 5.1 7.7 2.7 Finland 6.5 8.8 2.5 Poland 8.3 8.8 0.8 Sweden 6.0 8.9 2.7 France 7.8 9.9 2.3 United States 5.0 10.0 4.7 Portugal 7.8 10.2 2.7 Slovak Republic 10.4 14.2 3.7 Estonia 4.1 15.5 11.4 Spain 8.8 18.9 10.3 OECD 5.8 8.7 2.9 EU 6.9 9.4 2.7 1
countries on labour market policies? Employment protection regulations are very flexible in Estonia following the 2009 reform 4 3 2 Average scores 0-6 from lowest to highest strictness, 2008-09 2008 1 0 Note: Scores for Estonia, France and Portugal refer to 2009. Source: Venn (2009), updated for Estonia according to the 2008 Employment Contracts Act, which entered into force on the 1st of July 2009. countries on labour market policies? (cont.) Pensioners and unemployed people are increasingly at risk of poverty Share of the Estonian population with income less than the 60%-median threshold, 2000-07 2000 2001 2002 2003 2004 2005 2006 2007 Labour status Employed 9 9 9 9 5 6 6 6 Unemployed 50 47 48 49 60 60 62 61 Retired 18 21 21 19 23 29 37 43 Ethnic nationality Estonians........ 18 17 19 18 Non-Estonians........ 20 20 21 22 Total 18 18 18 18 18 18 19 20 Note: The income concept used is that of disposable household income in cash, adjusted for household size with modified OECD adult-equivalence scale. Change in data source in 2004 should be taken into account when comparing data for 2000-2003 with the following years. Source: Statistics Estonia. 2
countries on labour market policies? (cont.) Net income replacement rates are very low for those on unemployment assistance 50% 40% 30% Net income replacement rates for single persons, 2008 20% 10% 0% 43% 41% 29% 15% Estonia OECD Estonia OECD Beginning unemployment spell Long-term unemployed (13th month) Note: The replacement rates take into account unemployment benefits as well as other cash benefits (e.g. social assistance) and are calculated for a single unemployed person without children who previously earned the average wage. Source: OECD Benefit and Wages database. countries on labour market policies? (cont.) Only one-third of the registered unemployed receives UI benefits Registered unemployed persons by benefit status in Estonia, 1st half 2009 Stock Newly registered 37% Unemployment insurance (monthly average: EEK 4400 = EUR 281) 45% 31% Unemployment assistance (per month: EEK 1000 = EUR 64) 30% 32% No unemployment benefits 25% Source: Statistics Estonia; Ministry of Social Affairs 3
OECD recommendations on labour market policies To boost income security for the unemployed Estonia could, once the recovery is well under way and public finances permit, Extend the eligibility for unemployment insurance benefits Increase substantially the unemployment assistance benefit level Reduce maximum payments of unemployment insurance OECD recommendations on labour market policies Further improve the public employment services Need for well-developed information system to improve job-broking Concentrate on job counselling and short courses Focus on difficult-to-place clients 4
countries on social policies? Social spending in Estonia is well below the OECD average Source: Statistics Estonia; Ministry of Social Affairs countries on social policies? (cont.) Social programmes are not very redistributive The richest half of the population receives 39% of all social benefits Distribution by decile of each social benefit type Decile I II III IV V VI VII VIII IX X Total All benefits 9 14 15 13 10 8 8 8 8 7 100 Old age 9 17 18 14 10 7 7 7 6 5 100 Disability 22 13 14 11 7 8 8 7 7 2 100 Family 6 6 8 10 11 11 11 11 11 15 100 Unemployment 5 5 6 10 10 13 12 9 6 23 100 Housing 60 10 12 4 2 1 1 0 11 0 100 59% of the family and parental benefits goes to the richest half of the population Source: Calculations based on EU-SILC data provided by Statistics Estonia. 5
countries on social policies? (cont.) Pension replacement rates are low compared with OECD 120 100 80 60 40 20 0 Net replacement rate for mandatory pension programmes, 2006 Men, percentage of average wages Source: OECD Benefit and Wages database. OECD recommendations on social policies Strengthen the redistributive role of the existing programmes Reduce maximum parental leave payments Introduce an upper limit on 1 st -tier pensions Raise the national pension or the basic amount of 1 st -tier pensions Extend the use of means-testing in benefit programmes 6